Asset Allocation

I won't buy anything that I don't want to, nor think I can, hold forever! But my point on cash or other investments was more about the ability to have access to some sort of "money" if things go pear shaped. Again, not fearmongering, but my gut feeling is that if the very small chance occurs and things go bad really quickly for our country there would be a freeze on pretty much everything, and you'd be limited on what available cash you can withdraw from banks. Even then what cash you withdraw may be worthless to other countries. That's where having some other investments or collectables might not go astray (hey American with a yacht - I'll swap you a fancy bag for a boat ride out of here!). Let's not go down that rabbit hole though!

Vast majority in shares, small minority in other assets you think will at least hold their value and that have diversification benefit. Rebalance strategy to stop fear/greed.

 

I was more concerned about those countries like England, France, Germany etc. who were in the centre of the wars. If you look at their charts they often look like nothing happened either, but if you read into it those values were artificial and even when the markets opened essentially you couldn't sell your shares for less than those values by restriction, but noone would buy them at those values because noone believed them.

 

After I posted those links I realised that, in regard to dividends, that is what happened then which doesn't mean it will apply in the case of a future conflict.

To cause some people even more worry and sleepless nights is taxation. The Commonwealth took that over from the States in the middle of WWII. Taxation revenue had increased substantially by the end of that conflict.

 

There is 'always' some time for humour

 

Market breadth thinning is not just a current US phenomenon. Ominous signs.

Hot money in tools designed for passive?????

Maybe this is why Bogle always resisted ETF's - too easy to express an active view in a tool not designed for it.



Mind you valuation unaware flows have always been an issue - only the products change, the way humans tick doesn't.

 

Read this the other day:

ASX 200: The curse of the Australian sharemarket concentration is spreading

So thinking back to recent discussion here including @dunno and his posts on equal weighting etc which can help reduce concentration risk. And personally I’ve been giving the issue of concentration risk some thought recently but preferring the idea of allocation based on cap weight (eg large vs mid vs small) to reduce it accordingly.

The above article suggests that due to concentration risk being huge locally (banks & mining) and now the US with Technology that one split their allocation between large, mid and small cap and “re-balance” periodically.
Of course this could result in more portfolio holdings than some might want including me.

In the case of Australia there is the EX-20 ETF but materials are still around 20%:
Australian Ex-20 Portfolio Diversifier ETF

For local small caps unfortunately there is a lot of garbage so perhaps an active manager or rule based index ETF could suffice.

Globally indexing across the cap sectors likely makes the most sense. But which products to use whilst minimising the number of holdings and keeping cost low to reduce Concentration risk?

Personally we don’t really need more equities but I have and will always love the damn things and there’s a limit to how much cash / term deposits (hate Bond funds) I eventually want to accumulate. But I feel it prudent that any further equity purchases be focused on reducing concentration risk. Simplicity is still very important so I decided to limit it to two additional holdings being cap weighted indexed US mid caps and active mid / small locally.

End of ramble. But it’s a bit quiet here lately so thought it might stimulate some discussion?

 

Hi Nodrog,
Does this you are thinking of adding QUAL and MOAT to VGS
MVW and EX20 to VAS?

 

No.

 

What that means @Ynot is:



You and me both, bro. Called living the dream.

 

Eventual portfolio excluding Cash and TDs across personal and SMSF will be:

Australia: AFI, ARG, VAS, mir
Global: VGS, IJH

Still a relatively simple portfolio.

 

I feel you could suffer from massive investment remorse syndrome if you go down that path. You may wish to reconsider at least one of your selections.

 

In a relatively small and not diversified economy like ours there's not enough room for many players in most markets.
And then they become too big to fail and propped up by govm.
Or small local operators.
I think very few small caps break through most listed stocks being a wasteland of dreams and delusions.
Minning, RE and banking is where the local action is.
I see no reason going far off the ASX20 with few exceptions being corps like AD8 as a side bet.

A similar situation has happened in the US where the gov is very closely aligned and literally invested with the mag 7 tech giants. Polarising even such a huge market.

 

MIRror, MIRror on the wall am I the silliest investor of them all.

 

Not really if you are focusing on the income aspect. MIR/AFI usually pay in Feb, ARG/DUI/AUI pay in March, EFTs pay in Jan/April. If you fill the subsequent two months with SOL/BKW and WHF, you will have achieved monthly income much to the surprise of some on here. Not suggesting that of course but it is a way of achieving it.

 

And of course VAS pays quarterly albeit not so smooth. Plus at the moment with higher rates a fat pile of cash pays a decent amount monthly.

 

The key here is knowing that you don't know what you are doing, and then knowing you are doing it really, really well. It's when you don't know that you don't know that you get in trouble. You know?

 

The additional mental burden of the extra holding of IJH is offset by not needing to concern yourself with it's dividend as it is so small . At least for a few years, that thing tends to snowball if you give it time...

 

That feels like a Morally Impudent Response, let poor @Nodrog make his horrible life decisions in peace. I tried to talk him into the excitement of selling long dated options on TQQQ so he could understand the thrill of investing instead of this boring ETF/LIC business. But what's done is done.

 

....but when divided three it thus becomes

 

The Rumsfeld conjecture. Works every time or so I'm told.